Now, let’s start with a few statements to frame the background of this post.

  • The Holidays Act is unworkable because it is overly complex and lacks clear definitions. In addition, MBIE can tell you that you are not compliant, but can’t tell you how to get it right.
  • The Act won’t change in the near future. No political party or the present government has the fortitude because to change the Act will mean someone will lose – employers will have to pay more or employees will get paid less.
  • If the Act is not going to go away, we need to make it workable. Using common sense and practicable changes won’t undermine the present Act, but could redefine it to reduce the present over-the-top costs in trying to ensure compliance (if that can ever be done with the present Act). We can then get back to paying employees for their leave with some level of certainty, and remove the current culture of fear for employers that has been created by the Act as well as the actions and indecisive leadership of successive governments, MBIE and its predecessor DOL in not supporting payroll and employers with the known issues that have been apparent since implementation in April 2004.

Any changes must be included as an amendment to the Act or in regulations (there are currently no regulations for the Holidays Act). The reason it needs to be law is to protect employers and provide more certainty for payroll from the flip-flop approach of MBIE in giving conflicting decisions on what is compliant in one situation, but can be seen as non-compliant in another.  This is because at present MBIE can always go back to the Act and state an employer has not met the letter of the law as the legislation is vague and lacks certainty around exactly what is and is not compliant.

For instance, MBIE states in a range of documentation that an employer and employee can come to an agreement on how a week is defined. NZPPA has seen a range of organisations, in good faith, doing just that only to find after completing an agreement that MBIE disagrees and that it’s not compliant after all.  Again, MBIE is only looking at the letter of the law and nothing more (because the Act does not allow for anything else), whereas in business and payroll, we are trying to find solutions that have the best interests of employees at heart within an unworkable Act (especially when trying to define what a week is for an employee working variable hours).

Here is what NZPPA would like to see happen to make the present Act more workable for payroll and employers so that employees are paid correctly in regard to their leave entitlements stated under the Act.

Please see the following as high level talking points that need to be further developed.  The key to any change is that it must be workable, practicable and written in plain language.

The seven changes needed are:

  1. Change the Act to hours. All payroll systems are already based on hours as this is the base time interval and there are references to using hours throughout current legislation.  In addition, payroll systems are already converting weeks and days to hours and vice versa. Employers and payroll still need to show the employee has received a day or a week, but hours work far better than using days or weeks as the time interval.
  2. Allow the parties to an employment agreement to define which payments are regular and once agreed it becomes binding and cannot be challenged by MBIE, except if issues occur and the parties seek help.  Any issues in trying to create an agreement can be referred to a labour inspector or mediation.
  3. Allow discretionary payments to be excluded from gross earnings if the term discretionary has been included in the employee’s employment agreement, stating the parties have agreed that the payment is discretionary. Currently discretionary payments are not included in gross earnings.  Let’s be upfront with payments and call it as it is so that the employee and payroll know it is excluded.
  4. Allow the parties to an agreement to define how a week for an employee that works variable hours is defined. This could be through the use of an average over a defined period of time. Whatever the parties agree to should then become binding and should not be challenged by MBIE except if issues occur and the parties seek help. Any issues in trying to create an agreement can be referred to a labour inspector or mediation.
  5. If MBIE states an employer is non-compliant with the Act, in the first instance MBIE must provide clear guidance on what the issues are and how the employer can resolve them. Currently MBIE can tell an employer they are not compliant and threaten them with court action, however, they don’t provide any details on how they expect it to be resolved except to say “as per the Act” or “seek third party advice”.
  6. If the above changes (1 to 5) are implemented, all employers should be given a 12-month window to amend existing individual employment agreements and for collective employment agreements, the employer has until the collective is up for renegotiation.
  7. If the above changes (1 to 5) are implemented all current issues with underpayments should be set aside except for blatant breaches of the Act that are not in relation to the above. This is fair and creates a new starting point for both employees and their employers and, of course, for payroll moving forward.  If this is not made a part of resolving the issues with the Act, there will not be the new beginning the Act needs to become workable.

As stated at the start of this post, it is not about creating a new Holidays Act as that is not on the cards at this time, rather it’s about trying to make the Act workable based on its present structure.  

In this election year and with the current lolly scramble of promises, can we please have a promise to resolve the Holidays Act? But let’s be realistic, NZPPA has no real expectation that this will happen.

Happy to hear your constructive thoughts on this as we need to keep talking and raising our concerns with the Act until someone listens.

NZPPA supporting payroll since 2007!


  1. We have adopted a policy of tracking all Leave in Days and to date have not had one problem with it. Having Annual Leave in Hours and Sick & Alternative Leave in Days (which it must be) is just confusing, have one type of divisor only.

    There should be 1 calculation method for all Leave Transactions as well, either the Annual leave Calculations of Relevant Daily Pay Calculations.

  2. Annual leave accrual method. The reality is
    – employers and employees both want employees to take leave in advance of entitlement.
    – other legislation requires employers to consider flexible working hours

    If we cannot predict the value of the entitlement because it is not determined until the end of the 12 month period…… then this discourages
    – people to want to work flexible working hours to take leave before the year is up, or
    – creates over payments. And given it is nearly impossible to recover an overpayment
    – Results in additional payroll admin

    Simply annual leave should be accrued on an hourly basis, based on agreed contractual hours. If someone then increases their hours of work, they don’t get a windfall, and if someone decreases them e.g. to spend time with their family, they don’t feel ripped off.

    There is no “entitlement” as such. All annual leave is at the greater of ord or average even on termination.

    If someone takes LWOP, (other than parental) then the don’t accrue annual leave for those hours as they were not worked. This means when someone terminates they don’t find a mismatch between what they have accrued and the 8% value paid out.

    – Gross earnings should equate to taxable gross earnings. Discretionary or not. Lets keep things simple… If someone is getting an accommodation payment that IR believe is of benefit to the employee then it adds to AWE. Payrolls should not need to be running multiple accumulators because one Act sees something as a benefit and another considers it may be discretionary.

    Keep Baps Leave in Days. This works fine as it is…

    Payment for all leave should be at the Greater of ORD or AWE. ORD should have 1 calculation and be based on contractual hours, fortnightly allowances (e.g. higher duties) not overtime, or other payments that require a legal option to determine at the individual level if something is “regular” or not. The extras are picked up in the AWE calculation anyway.

    For employees who are not full time, where they are consistently working hours above their contracted hours, there should be a mechanism that requires employers review the standard contractual hours and correct them.

    An exception would need to apply to those who do not have standard hours of work where they can simply be paid at the average.

    AWE calculations are performed based on the pay period. E.g. if 3 weeks of leave is taken for someone on a fortnightly payroll then the average is recalculated after 2weeks.
    The Ord calculation is based on the standard salary in place for each day of leave. This way if someone gets a pay increase part way through the leave, they get the impact of that rather than the ORD being based on whatever it was at the start of the leave period (which is what MBIE require) and which creates a contractual conflict requiring another calculation comparison.

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